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Tax

CRA options extensive for collecting unpaid taxes

With recent reports claiming that the Canada Revenue Agency’s (CRA) total uncollected tax debt has soared in the last decade, taxpayers should be aware that the agency can use ‘draconian’ powers in order to collect those overdue amounts, Toronto tax attorney David J. Rotfleisch tells AdvocateDaily.com.

As the National Post reports, the CRA’s total undisputed tax debt, which includes uncollected taxes and penalties that the agency has either assessed or estimated, grew to $38 billion in 2014-15, up from $18 billion in 2004-05.

Meanwhile, the debts the agency views as uncollectable have grown 125 per cent over the same period.

As the article notes, factors such as the Income Tax Act’s 10-year time limit for the CRA to collect outstanding taxes — with certain factors that can suspend or restart the limitation periods — as well as problems collecting from bankrupt companies and individuals, are making it challenging to recover the taxes owed.

Revenue Minister Diane Lebouthillier’s office also notes that external factors have increased pressure on the CRA’s collection program. These include growth in both the individual and business tax bases, new responsibilities for the CRA, including provincial harmonization of corporate and retail sales taxes, and increasing investment in compliance activities for identifying unpaid taxes.

As Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, explains, the CRA has a number of options available to it, in terms of collecting taxes owed.

“They can seize bank accounts, issue wage garnishees, lien houses and seize assets including accounts receivable, all without court orders. This is in addition to the power to withhold other government payments.”

Rotfleisch also cautions that the CRA is currently focused on unreported income from the shared economy, and recently went to court to force Uber to release information.

“Car rental in Canada through Turo is the latest participant in the shared economy. Like any other shared economy income source such as Uber or Airbnb, all income earned is fully taxable and has to be reported to the CRA,” explains Rotfleisch.

 

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